The legality of Non-Compete Clauses in Kenya

A non-compete clause is a contractual agreement between two parties, typically an employer and employee, where the employee agrees not to engage in certain business activities that would be considered competitive with the employer's business. The purpose of a non-compete clause is to prevent the employee from working for or starting a business that would compete with the employer during and after their employment.

Non-compete clauses are commonly included in employment contracts, particularly for employees who have access to sensitive information, trade secrets, or have close relationships with clients. The specific terms of a non-compete clause may vary, but they generally prohibit the employee from engaging in activities such as working for a competitor, starting a competing business, or soliciting the employer's clients/other employees for a specified period of time after the termination of employment. These clauses are necessary to protect business interests and prevent the loss of valuable information and clients.

Enforceability of non-compete clauses

The enforceability of non-compete clauses varies by jurisdiction and is subject to certain legal limitations. It's important for businesses to ensure that their non-compete clauses are reasonable in scope, duration, and geographic location, and are drafted in compliance with applicable laws.

In Kenya, non-compete clauses are regulated by the Contracts in Restraint of trade Act, Cap 24 of the Laws of Kenya.

Section 2 of the Act provides that any agreement or contract which contains a provision or covenant whereby a party thereto is restrained from exercising any lawful profession, trade, business or occupation shall not be void only on the ground that the provision or covenant is therein contained:

Provided that—

(i) the High Court shall have power to declare the provision or covenant to be void where the court is satisfied that, having regard to the nature of the profession, trade, business or occupation concerned, and the period of time and the area within which it is expressed to apply, and to all the circumstances of the case, the provision or covenant is not reasonable either in the interests of the parties, inasmuch as it affords more than adequate protection to the party in whose favour it is imposed against something against which he is entitled to be protected, or in the interests of the public, inasmuch as the provision or covenant is injurious to the public interest;

(ii) where a minor has entered into any agreement or contract containing any such provision or covenant, the court shall also take into consideration whether it was for his benefit that he did so.

Further, Section 3 of the Act provides as follows:

Notwithstanding and in addition to anything contained in section 2, any such provision or covenant shall be void in any case where an employer terminates the services of an employee in contravention of the terms of the contract of service.

In summary, for a non-compete clause to be enforceable in Kenya, it must meet the threshold below:

i) The clause must limit the time of application;

ii) The clause must limit the scope of application;

iii) The clause must be reasonable;

iv) The clause should not be injurious to public interests; and

v) The clause must be limited to a particular geographical application.

How we can help you

At CM SME Club, we will help you draft non-compete clauses that are tailored to your specific needs and provide guidance on how to enforce when necessary. With proper legal protections in place, you can rest assured that your business’s confidential information will remain secure. Talk to us via email or call +254 745 342 125.

Published on Aug. 22, 2024, 1:10 p.m.